Telecom buyouts, not any time soon

Business 2.0 online columnist Paul R. La Monicasays that Investors are hoping that AT&T, MCI and Sprint may soon get acquired…they’ll have to keep waiting. AT&T’s reported a $7.1 billion third-quarter loss due to a write-down in the value of its long-distance network, many expect the consolidation to start soon, but La Monica doesn’t think so. He sees the speculative run-up in MCI stock as fool’s gold

Todd Rosenbluth, an equity analyst with Standard & Poor’s, thinks that Ma Bell’s debt cutting moves are all about survival, not for making the company more attractive to buyers. “Why buy a business that’s been declining 10 to 15 percent?” said Patrick Brogan, assistant director of research for Precursor, an independent research firm that focuses on telecom and tech.

Despite that, the price is still too high. For instance, Ma Bell has a market cap of $12.5 billion, and a net debt of $6.3 billion. MCI has a net debt of $550 million and a market cap of $5 billion. My two cents on this is that AT&T and Sprint should merge. They have a fighting chance if they do so. Sprint has enough local properties in the South East to keep it alive. The two companies can carve out a stable niche in business services, especially given that MCI is likely to implode in next 12-to-18 months. With Sprint experimenting with wireless-to-home bridging technologies like the one I wrote about, together they can really compete.

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